Author Topic: Are the PAF's FA-50PHs overpriced?  (Read 13045 times)

adroth

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Are the PAF's FA-50PHs overpriced?
« on: June 18, 2017, 04:51:27 PM »
Allegations that the Philippine Air Force's FA-50PH aircraft are over-priced are being circulated on various social media outlets. Here's an example that was shared on the forum's FB extension:

https://www.facebook.com/groups/rpdefense/permalink/1331984156887428/?match=c2QgbG9wZXosbG9wZXosc2Q%3D

Here is the blog article associated with the FB post above:

http://www.newsgearph.com/2017/06/468-million-us-worth-of-afp-fighter-jets.html

This thread seeks to promote rational discussion about these assertions.

====

For reference, here is the Notice of Award for the Surface Attack Aircraft / Lead-In Fighter Trainer project that the DND awarded to Korean Aerospace Inc.



« Last Edit: June 19, 2017, 02:06:11 AM by adroth »

adroth

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Re: Is the PAF's FA-50PH overpriced?
« Reply #1 on: June 18, 2017, 04:52:31 PM »
For an item to be "overpriced", it must have been acquired a price that was beyond it's actual value. But . . . what IS an equipment's ACTUAL value?

The FA-50's critics typical adopt an easy . . . but ultimately flawed . . . approach to determining the value of equipment: Look for open-source news articles about equipment acquisitions, divide the reported value of the acquisition by the number of reported pieces of equipment, and then assume that the result equates to the per-unit value of the equipment.

Simple . . . easy to understand. But reality is rarely that simple.

Equipment acquisitions are often in the form of packages, rather than individual pieces of equipment. In the case of the FA-50PH, for example, the US$421,638,000 price tag wasn't only for the 12 units of aircraft. It also included components of the Integrated Logistics Package (mandated by acquisition regulations), training, and a host of other items that the PAF has not itemized.

The following example of an acquisition by the US DSCA will provide insight. Although not directly related to the FA-50, it presents an example of how these acquisitions are packaged:

http://www.dsca.mil/major-arms-sales/iraq-f-16-aircraft


Quote
Media/Public Contact:
Charles Taylor (703) 601-3859 / Paul Ebner (703) 601-3670
Transmittal No:
11-46
WASHINGTON, Dec. 12, 2011 – The Defense Security Cooperation Agency notified Congress today of a possible Foreign Military Sale to the Government of Iraq for 18 F-16IQ aircraft and associated equipment, parts, weapons, training and logistical support for an estimated cost of $2.3 billion.

. . .

Also included: LAU-117 Maverick Launchers, site survey support equipment, Joint Mission Planning System, Ground Based Flight Simulator, tanker support, ferry services, Cartridge Actuated Devices/Propellant Actuated Devices (CAD/PAD), repair and return, modification kits, spares and repair parts, construction, publications and technical documentation, personnel training and training equipment, U.S. Government and contractor technical, engineering, and logistics support services, ground based flight simulator, and other related elements of logistics support. The estimated cost is $2.3 billion.

Comparing the FA-50PH's acquisition cost with those of its other users will ultimately yield a flawed conclusion. With the Philippine Air Force only now returning to supersonic flight, the road to full fighter-operations capability will be both time consuming and expensive as the service is rebuilding this capability from scratch.

In contrast, Indonesia -- whose acquisition was cited by critics as a point of comparison -- has been operating even more sophisticated equipment for years and can actually do without the foundation building that the Philippine Air Force needs to do.
« Last Edit: June 19, 2017, 02:08:48 AM by adroth »

adroth

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Re: Are the PAF's FA-50PH overpriced?
« Reply #2 on: June 18, 2017, 05:55:44 PM »
Another problem that military enthusiasts face, when comparing prices between countries, is dealing with differences between versions of equipment.

In the case of the T-50 family of aircraft, is actually available in multiple versions. In South Korean service, it is available in 4 versions, one of which has been discontinued.

Indonesia, Iraq, Thailand, and the Philippines have their own versions with their own respective customizations . . . and consequently their own cost differences.





 


« Last Edit: June 18, 2017, 06:03:58 PM by adroth »

sbhntr

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Re: Are the PAF's FA-50PHs overpriced?
« Reply #3 on: June 19, 2017, 03:28:03 AM »
In this a case where a politician or bureaucrat who can keep an F/A -50 grounded is more effective and valuable to an opfor than an anti air missile?

I was about to take this guy seriously until I read about the incompatibility between the radar fire control system and the sidewinder. What exactly is he talking about? The sidewinder carries an IR system, so does certain versions of the maverick. Is he referring to a cueing sytem? Even on more “lethal” fighters, those two systems tend to be separate (thus the proposed increase range for the -9x block3. should radar jamming affect the radar controlled fire system and missiles like the aim-120, the -9x could step in).
Jm2c

solarprism

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Re: Are the PAF's FA-50PH overpriced?
« Reply #4 on: June 19, 2017, 09:46:21 AM »
Another problem that military enthusiasts face, when comparing prices between countries, is dealing with differences between versions of equipment.

In the case of the T-50 family of aircraft, is actually available in multiple versions. In South Korean service, it is available in 4 versions, one of which has been discontinued.

Indonesia, Iraq, Thailand, and the Philippines have their own versions with their own respective customizations . . . and consequently their own cost differences.





 


Also it all comes down to the negotiation, if SK said, i want to sell you 30mil. USD per FA-50, Phil dont want to buy, ok find another seller. But if Phil. dont have any other choice or time is a variable, they need to accept that price.

adroth

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Re: Are the PAF's FA-50PH overpriced?
« Reply #5 on: June 19, 2017, 10:46:52 AM »
Also it all comes down to the negotiation, if SK said, i want to sell you 30mil. USD per FA-50, Phil dont want to buy, ok find another seller. But if Phil. dont have any other choice or time is a variable, they need to accept that price.

Exactly.

We also have to factor in any premiums that any potential vendor may impose upon the Philippines for our history of unreliability as a buyer.
« Last Edit: June 19, 2017, 01:47:17 PM by adroth »

adroth

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Re: Are the PAF's FA-50PHs overpriced?
« Reply #6 on: June 19, 2017, 01:46:31 PM »
Another example of how complicated published figures can be: Offset Programs

The ACTUAL value of of a deal may very well not be limited to the purchase price of the equipment

http://saabgroup.com/sv/Media/news-press/news/2011-06/Gripen-Offset-Program-delivers-2374-billion-CZK-to-the-Czech-Republic/

Quote
Background

Czech Gripen Offset Program

Gripen International is contractually committed to generate Offset and Industrial Cooperation to a value equal to 130% of the Gripen fighter lease contract value, which represents 25.545 billion CZK. The Offset Agreement requires a minimum direct Offset equalling 20% of the total Offset Agreement value (direct Offset refers to transactions in the defence, aerospace and security sectors). The Offset Program runs from June 14, 2004 to December 31, 2014.

All aspects of the Czech Gripen Offset Program are governed by the Agreement on the Program of Industrial Cooperation, a bilateral contract concluded between Gripen International and the Ministry of Defence of the Czech Republic. Czech offset legislation applies in the form of Ministry of Industry and Trade Decree No. 19/2010. The Ministry of Defence has the final power to approve or reject offset transactions and offset values within the Czech Gripen Offset Program. The Ministry of Industry and Trade is the administrator and technical guarantor of the Czech Gripen Offset Program, together with the multi-ministerial Offset Commission. In accordance with the contractual conditions, the Czech Gripen Offset Program is subject to annual independent audits.


« Last Edit: June 19, 2017, 03:09:04 PM by adroth »

adroth

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Re: Are the PAF's FA-50PHs overpriced?
« Reply #7 on: June 19, 2017, 04:40:54 PM »
US-Indonesian negotiations for F-16s in the 80s also included offsets

https://books.google.com/books?id=uSzvdwvGkT8C&pg=PA107&lpg=PA107&dq=indonesia,+offset,+casa&source=bl&ots=le7PE1xqwn&sig=NiUJzbV9gM-bQjgal6Rc4LtZIoM&hl=en&sa=X&ved=0ahUKEwjs9KuKvsnUAhUBDWMKHR2xA5EQ6AEILjAB#v=onepage&q&f=false

Quote
Adding significantly to this growth was the success of IPTN in getting an order from General Dynamics to manufacture components of the F-16 in 1986.

Thi was the result of an agreement the Indonesian government made to purchase the F-16 from General Dynamics, which in turn gave IPTN an offset worth 35 percent of an F-16 squadron that Indonesia eventually agreed to buy.

adroth

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Re: Are the PAF's FA-50PHs overpriced?
« Reply #8 on: June 21, 2017, 03:17:07 PM »
Assuming that it were actually possible to ascertain the per-aircraft value of the FA-50 by simply dividing the total cost of the deal by the number of aircraft, then the PAF FA-50 was actually bought at a bargain . . .

. . . when compared to the Iraqi Air Force's 24 FA-50s which were reportedly bought for US$1.1B. This would come to $45.M per aircraft. Which is larger than the alleged $38.66M attributed to the PAF's FA-50s by its detractors.

Note that the article below actually shows why you CANNOT just divide the sum by the number of aircraft because of the additional equipment purchased along with the aircraft . . . and why it is ultimately not possible to come up with actual per-aircraft figures.

===

Iraq strikes $1.1bn deal for 24 T-50 fighter jets with South Korea
Shereen El Gazzar
December 12, 2013 Updated: December 12, 2013 05:46 PM
     
http://www.thenational.ae/business/industry-insights/aviation/iraq-strikes-1-1bn-deal-for-24-t-50-fighter-jets-with-south-korea?hc_location=ufi

Korea Aerospace Industries (KAI) has struck a US$1.1 billion deal with Iraq to supply light fighters, as the South Korean firm seeks to tap into the Middle East defence market.

Under the deal, KAI will supply 24 T-50 jets, provide training to Iraqi pilots, and provide support services to the Iraqi air force over the next two decades.

That could push the value of the deal to $2bn, KAI said.

< Edited >

adroth

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Re: Are the PAF's FA-50PHs overpriced?
« Reply #9 on: June 21, 2017, 05:04:32 PM »
When comparing Indonesian T-50is with the the FA-50 . . .


Indonesia inducts T-50i jet trainers
February 16, 2014 by australianaviation.com.au

http://australianaviation.com.au/2014/02/indonesia-inducts-t-50i-jet-trainers/

The Indonesian Air Force (TNI-AU) has formally inducted a squadron of 16 Korean Aerospace T-50i Golden Eagle advanced trainers into service.

< Edited >

The T-50s were ordered in May 2011 at a cost of US$400m (A$443m), and they will replace Hawk Mk53 jets which have been in service since 1980.

The Indonesian T-50s have been equipped with systems similar to those installed on the multi-role F/A-50, albeit without an air intercept radar, although Indonesia reportedly has plans to install a radar at a later date.


« Last Edit: June 21, 2017, 05:12:07 PM by adroth »